The U.S. Securities and Exchange Commission (SEC) has officially charged Zachary Coburn, the founder of cryptocurrency exchange EtherDelta, for operating an unregistered securities exchange. The regulatory agency’s move to charge Coburn comes amidst a greater trend of increasing regulation over the cryptocurrency industry.

In a press release today, the SEC announced that the charges against Coburn are the result of EtherDelta’s ERC20 token offerings, many of which were issued through initial coin offerings (ICOs) and qualify as securities.

“EtherDelta is an online platform for secondary market trading of ERC20 tokens, a type of blockchain-based token commonly issued in initial coin offerings (ICOs). The order found that Coburn caused EtherDelta to operate as an unregistered national securities exchange,” the release explained.

The press release further notes that this is the regulatory agency’s first enforcement action against a platform operating as an unregistered national securities exchange.

EtherDelta is a popular Decentralized Exchange (DEX) that utilizes Ethereum-based smart contracts to execute buy and sell orders. According to the commission, the exchange had violated multiple securities laws due to its offering of specific assets that were defined as securities in the SEC’s 2017 DAO report.

Stephanie Avakian, the co-director of the SEC’s Enforcement Division, spoke about the charges against the EtherDelta founder, saying:

“EtherDelta had both the user interface and underlying functionality of an online national securities exchange and was required to register with the SEC or qualify for an exemption.”

Steven Peikin, also a co-director of the SEC’s Enforcement Division, further noted that the charges against EtherDelta come as the agency is increasingly trying to protect investors in the distributed ledger technology (DLT) and cryptocurrency industry.

“We are witnessing a time of significant innovation in the securities markets with the use and application of distributed ledger technology. But to protect investors, this innovation necessitates the SEC’s thoughtful oversight of digital markets and enforcement of existing laws,” he said.

Since being charged, Coburn has consented to the order and has agreed to pay $300,000 in disgorgement, as well as a $75,000 penalty and $13,000 in prejudgment interest. It is important to note that Coburn has not admitted to, or denied, any of the SEC’s findings.

SEC Moving Quickly to Regulate the Cryptocurrency Industry

The SEC’s charges against the EtherDelta platform come less than a week after they released their annual report that detailed how they would be moving to regulate the cryptocurrency industry.

In the report, they specifically noted that they would be focusing their efforts on regulating ICO tokens that are being offered to investors as unregistered securities, and have recently shut down multiple platforms, including TokenLot, that are offering these products to investors without receiving the proper licensing.

As for their methods of reducing industry fraud, the commission explained that they would focus on increasing the public’s awareness of the dangers of nascent industries, and that they would be prosecuting violators to the fullest extent of the law.

The charges against Coburn likely signal that more cases against unlicensed cryptocurrency exchanges, especially those offering tokens resulting from ICOs, are to come in the near future as the SEC moves to regulate the cryptocurrency industry.